6 Mortgage Myths

[sgeeeee]

Re: C'mon, guys.

hi Nords,

I time the markets, I eat fish oil, and we have a huge whompin' mortgage for investment purposes...

Maybe Wab was wrong and it's not the fish oil that makes TH so disagreable.

As TH has pointed out before, I think that we're all agreed that a mortgage held for investment purposes should have a lower interest rate than any other bonds in the retirement portfolio.  Otherwise you're effectively taking out a higher-interest loan to buy lower-interest bonds.  No matter how good it makes you feel, you're losing money...

Well now. . . Think about that for a minute, Nords. I don't believe that, and I don't think many people will if they think about it for a few minutes. That's a lot like saying you should look at your investments each day and take everything out of the underperforming ones and put it all in your top performing one. If one of your investments earned 2% today and some of your investments earned 0.5%, do you conclude that you're losing money? Understanding the time frame of this decision is critical to understanding why keeping a low interest mortgage can be very valuable.

You have an allocation in large cap stocks, short term bonds, real estate, . . . whatever because you know that the performance today is not the performance tomorrow. You don't expect every one of those investments to perform the same (or even well) throughout the life of the investments. You have to consider the time frame of the investment and why you have it. One of the first questions unclemick always asks of people looking for investment advice is what purpose that investment is supposed to serve. That applies here too.

I have to point out, SG, that you could be accused of trolling TH-- he rises to the bait every time you bring up a post containing the word "mortgage".  . .

Nords, people could accuse me of all sorts of things. They could call me names and spit at me. I really don't expect to let that bother me much (unless their spitting is on target) . I read an article that dealt with an issue that has been discussed on this board, so I posted a summary and answered some questions. You may feel like this was an unproductive diatribe, but I actually felt like this was the closest we've come to having an honest, factual discussion of this issue. I really think that the messages from several other posters indicate this too.

 

[nfs]

Re: C'mon, guys.

I don't believe that, and I don't think many people will if they think about it for a few minutes. That's a lot like saying you should look at your investments each day and take everything out of the underperforming ones and put it all in your top performing one. If one of your investments earned 2% today and some of your investments earned 0.5%, do you conclude that you're losing money? Understanding the time frame of this decision is critical to understanding why keeping a low interest mortgage can be very valuable.

Can be, sure. But Nords' point was not that it could not be valuable. It was that it was not valuable in the case where the asset side of your balance sheet contains bonds that pay a lower rate of interest than you are paying on the mortgage.

A mortgage is just a callable bond with a duration shorter than that of regular callable bonds. So anyone paying a 5% 30 year mortgage and holding, for example, an intermediate term corporate bond or bond fund that pays 4% is burning their own money.

 

[sgeeeee]

Re: C'mon, guys.

. . .  So anyone paying a 5% 30 year mortgage and holding, for example, an intermediate term corporate bond or bond fund that pays 4% is burning their own money.

Ahh . . . Now you've added something about timeframe. And even this is only true if you assume that you are holding the bond for the entire time of the mortgage.

 

[nfs]

Re: C'mon, guys.

And even this is only true if you assume that you are holding the bond for the entire time of the mortgage.

Under what circumstances do you expect the bond position to disappear?

This really isn't that hard. If you own $200k worth of bonds (individual or in a fund) that pays you 4% and you owe $200k on your mortgage on which you pay 5%, you're out of pocket two grand a year less taxes. It's the equivalent of lighting the stove with a Ben Franklin every month.

Why would you do this?

 

[retire@40]

Re: C'mon, guys.

Under what circumstances do you expect the bond position to disappear?

This really isn't that hard.  If you own $200k worth of bonds (individual or in a fund) that pays you 4% and you owe $200k on your mortgage on which you pay 5%, you're out of pocket two grand a year less taxes.  It's the equivalent of lighting the stove with a Ben Franklin every month.

Why would you do this?

If you are in the 35% tax bracket and the bonds happen to be state municipals.

 

[nfs]

Re: C'mon, guys.

If you are in the 35% tax bracket and the bonds happen to be state municipals.

You're in the 35% bracket, which means your taxable income is >$300k. Your AGI is probably >$325k. Last I looked, people with $325k AGIs had their Schedule A deductions whacked.

So you're collecting 4% tax-exempt interest and paying 5% non-deductible interest. Tell me why this is supposed to be a good deal.

 

[haha]

What difference does that make?  At the point you think the margin interest rate becomes unacceptable, you simply give them their money back either with the money you borrowed, or god-forbid, with another loan.  You make it sound like after the point you margin, you can't undue it for whatever reason you deem necessary (such as the interest rate going up). 

Azanon, this is probably beyond my ability to clarify. But there is power when one can control the timing of a financial decision. Say I get a $100,000 mortgage loan at 5.5% today (I don't know if this is realistic or not) vs a $100,000 margin loan. Say interest rates increase 2% over one year, and stock prices go down, as they well might under this scenario. Well, unless I am a momentum player, which I definitely am not, the securities that I bought at a higher price should still be attractive, likely more attractive. Under the mortgage scenario I can continue to fund it with a 5.5% loan. If interest rates increase 4 more points, I can still fund my these securities at 5.5%. I think it is fairly clear that the PV of my loan responsibility is going down as interest rates go up, as long as I have the fixed loan.

One factor that cuts slightly in the opposite direction is that the mortgage will ordinarily require amortization of the loan principle, whereas the margin loan is interest only.

If interest rates go down meaningfully, the margin loan would be better, at least with respect to rates. But I think this is low probability scenario, given the already rock bottom state of today's rates.


One more comment- you indicate that what counts on a balance sheet is the net equity, not the specific characteristics of the assets and liabilities involved. I think that net worth is important, but far from the whole story. There are liquidity and control issues to be considered also.

Lastly, none of this is meant to address whether or not one should use leverage. If one decides to do so, I think it is pretty clear that it is a good deal to fund it at historically low fixed rates, as is possible with a home mortgage in today's market.


Mikey

 

[haha]

Most home lenders use what is called the Fannie Mae  mortgage form.  This form is used for loans that are sold on the secondary market.  Each state has its own variant of the form so that the mortgage complies with state law requirements.

Under this form, the mortgage is in default if the borrower fails to comply with a terms of the mortgage.  For example, the borrower doesn't make payments, doesn't pay property taxes, doesn't maintain insurance, sells the property, doesn't use the property as his residence for at least a year (yeah, that's what the form says), allows the property to deteriorate,  lies on the loan application, etc.  There must be a breach by the borrower of a term in the mortgage for a default to occur.  Most states also require a time period where the borrower can cure the default.

On commercial property, many mortgage forms provide that the lender can call the loan in default if the lender "deems itself insecure".  These "insecurity" clauses needless to say are disliked by commercial borrowers and sometimes they are able to negotiate out of them.  I never have seen an insecurity clause in a home mortgage.  Even in commercial loan, a lender is unlikely to start foreclosure just because it deems itself insecure.

Martha, thanks for very concise expert's opinion on this issue.

Mikey

 

[retire@40]

Re: C'mon, guys.

You're in the 35% bracket, which means your taxable income is >$300k.  Your AGI is probably >$325k.  Last I looked, people with $325k AGIs had their Schedule A deductions whacked.

So you're collecting 4% tax-exempt interest and paying 5% non-deductible interest.  Tell me why this is supposed to be a good deal.

I agree that someone in the 35% bracket must phase out his itemized deductions, but not all the interest is necessarily non-deductible as you say. Even someone in the 35% bracket could deduct most of the mortgage interest.

I was too lazy to do the math the 1st time, but let's look at the actual numbers now using someone in the 28% bracket that still proves my point.
AGI = $150,000
Mortgage Interest Paid= $30,000
Mortgage Interest Deductible = $29,685 (98.95%)
Lost Mortgage Interest Deduction = $315 (1.05%)

Mortgage Rate = 5%
Tax Free Bond Interest Rate = 4%

28% * 98.95%  = 27.706% effective tax savings

5% * 27.706% = 1.3853%

5% - 1.3853% = 3.6147% after-tax mortgage rate

Therefore, a 4% tax-free bond is better than paying a 5% mortgage.

 

[daystar]

I plan on doing a 15-year mortgage when I buy a house. I'll probably get a roommate to help with the expenses. Then I'll have plenty of cash flow to pay the house off early. I'll do this for peace of mind and my own mental sanity. I can then buy a second house and rent it out, if the market seems good for rentals. Ideally, I would like to own two or three houses and have them fully paid off so I can start collecting some cash flow on those rentals in retirement.

Did you know that "The Donald" prefers investing in properties? You can see him on The Apprentice on Thursday's:
http://www.nbc.com/The_Apprentice/

 

[sgeeeee]

Re: C'mon, guys.

Under what circumstances do you expect the bond position to disappear?

If it matures before your mortgage is over or if you sell it to take advantage of better investments in the future?

This really isn't that hard.  . .

One would think. . .

Mortgage rates hit record low levels a few years ago. It would be great if low mortgage rates occured at the same time as high returns on stocks and bonds, but that doesn't happen. On the other hand, periods of low stock and bond returns have historically been followed by periods of higher returns. If you wait for those periods of high returns to happen, you will not find low mortgage rates to take advantage of. So . . . you can buy into the unprecedented low mortgage rates today and hope to make your money back when future returns increase to more typical levels. Historical simulators illustrate that this strategy has provided superior performance results in the past. If you chose to pay off a sub-5.25% loan in the past, you lost money compared to investing that payoff money in a balanced portfolio. Those are the facts.

If you choose to compare only current mortgage rates and current stock/bond returns, you will not be able to predict the results illustrated by the more thorough, time valued historical simulator. When you do this, you are using today's numbers and extrapolating them through the life of the loan as if they do not change.

Another interesting point to consider is that real return is what you really care about for your portfolio investments. The mortgage payoff choice guarantees your absolute return on your money for the life of the loan, but does nothing to protect your real return if we go through a period of high inflation again. If you have considered owning TIPS or I-bonds for their inflation protection characteristics, you might want to consider that mortgage in much the same way.

 

[John Galt]

Hi salaryguru! Excellent post!

While I recognize the value of using history to predict
interest rate fluctuations vis-a-vis returns on various
investments, I seldom do it. I tend to look at
survivability (financial and otherwise) under
a bunch of "worst case scenarios". Partly an age
thing I know.

John Galt

 

[azanon]

Lastly, none of this is meant to address whether or not one should use leverage. If one decides to do so, I think it is pretty clear that it is a good deal to fund it at historically low fixed rates, as is possible with a home mortgage in today's market.

That captures the majority of my original point, though it falls somewhat in-between our discussion.  

My only goal was for someone to understand if they're investing taxable monies not earmarked for necessary expenses we all have, AND they still have loans of any kind, then they are leveraging (i used margining) and generally speaking, that's higher risk than using monies that arn't, in effect, borrowed.

You gave a scenarion of a margin loan going sour (interest rates go up, stocks go down).  How bout the housing market collapsing (equity on your borrowed investment going down), still paying interest on it, AND stocks going down (the invested money you're not using to pay the house back with at the higher price you paid) at the same time.  Same thing; triple ouch there.  And again, i don't believe in paper loses, though one might say who cares if the house you live in goes down, cause you're not moving.  To those I say, never say never.  The status quo today is not living one place for long.

Also, if that's a "safe" way to go, what's keeping people who've paid their house off from borrowing against it and investing it?

Martha, thanks for very concise expert's opinion on this issue.

Yeah, I appreciated her pointing out all the various risks involved in mortgages as well, and the several ways one can be found in default.

 

[John Galt]

Regarding the uncertainty over whether you might be moving..........after I semiretired in 1993, I moved back to my home town in Illinois, mainly because I did not
have any better ideas at the time. Someone said to me
"Are you back to stay?" My reply? "I'll be here until they plant me!" Since then I have moved 7 times,
including 2 interstate moves. So much for staying put

John Galt

 

[nfs]

Re: C'mon, guys.

So . . . you can buy into the unprecedented low mortgage rates today and hope to make your money back when future returns increase to more typical levels. Historical simulators illustrate that this strategy has provided superior performance results in the past. If you chose to pay off a sub-5.25% loan in the past, you lost money compared to investing that payoff money in a balanced portfolio. Those are the facts.

So you're a market timer too. You would rather borrow at 5% today because you're very likely to make more than 5% in the future.

You know what? I agree with you because I think the long run return of a balanced portfolio is almost certain to be >5% myself.

Do I do it myself? No, because the extra volatility I generate by levering up far outweighs the incremental return. If I wanted that volatility, I could still pay off the mortgage and go with a portfolio that was 80-100% equities.

Different strokes for different folks.

azanon, up above, went through a long calculation to demonstrate that it was worth borrowing at 5% (3.7?% after tax) to buy 4% tax exempt munis. If you look at the calculations, he wants to do it with a $600k mortgage. The net effect is an incremental $1800 per year.

It doesn't work for me. As an ER with a mean life expectancy of another 50 years or so, I wouldn't be in hock to a bank for $600k, with my house on the line, for an extra $1800 a year. To me, that's a bad tradeoff.

For azanon and you, it could be jim-dandy.

Ain't markets (and civil arguments like this) grand? :

 

[sgeeeee]

Re: C'mon, guys.

So you're a market timer too.    You would rather borrow at 5% today because you're very likely to make more than 5% in the future.

Okay. If that's how you want to define market timer. But why wouldn't you call the person who chooses to payoff the mortgage a market timer? They choose to place investment funds into a house today rather than keep it in their long term portfolio? I would argue that neither of these investment decisions are really what most people refer to as market timing. . . But I think you know that.

You know what?  I agree with you because I think the long run return of a balanced portfolio is almost certain to be >5% myself.

Do I do it myself?  No, because the extra volatility I generate by levering up far outweighs the incremental return.

And that's a very reasonable decision. Everyone would be advised to understand their own level of comfort with various risk and they will be happier if they choose to invest in ways that are consistent with that. Of course, in this case, when you are increasing your SWR and improving your odds of surviving poor economic conditions . . . when you are keeping your equity/bond allocation (and therefore your portfolio beta) constant, what do you really mean by "extra volatility"?

If I wanted that volatility, I could still pay off the mortgage and go with a portfolio that was 80-100% equities.

Well . . . not really. If you run the FIRECALC simulations you will discover that increasing your equity/bond ratio does increase volatility, SWR and terminal value. But keeping the mortgage does not increase volatility and it will increase SWR more than a simple readjustment in allocation.

azanon, up above, went through a long calculation to demonstrate that it was worth borrowing at 5% (3.7?% after tax) to buy 4% tax exempt munis.  If you look at the calculations, he wants to do it with a $600k mortgage.  The net effect is an incremental $1800 per year.

It doesn't work for me.  As an ER with a mean life expectancy of another 50 years or so, I wouldn't be in hock to a bank for $600k, with my house on the line, for an extra $1800 a year.  To me, that's a bad tradeoff.

Again, this is not quite acurate. The analysis azanon did looked at what kind of minimum return a single bond would have to provide in order to break even. He looked for the point where the differences between the bond and the 5% mortgage were insignificant. That's a useful number to set minimum expectations. He did not calculate what a balanced portfolio investment might return over the 30 year life of the mortgage. Again, FIRECALC can provide a range for the gains that your balanced portfolio will provide. It will vary based on your nest egg, your mortgage value and your stock/bond allocation. But the number can be quite significant -- even dramatic.

nfs, I don't want to talk you out of your strategy. It really does make no difference to me what you or anyone else on this board decides to do for themselves. I think, above all, you should be comfortable with your decision. But I am interested in making it clear to people who are facing this decision that it is more complex than a simple rule-of-thumb directive might make it. And I do want to provide some indication of how one might take a look at the numerical part of the decision.

Having read the posts of many others on this board who have been retired longer than I have, I have to believe that I might decide to payoff my mortgage early too -- one of these days. It seems like several ERs simply paid off their mortgage to be "done with it". I have no reason to believe that I won't reach the same point some day. When that day arrives, I will pay it off and know that I made the right decision.

 

[nfs]

Re: C'mon, guys.

Okay. If that's how you want to define market timer. But why wouldn't you call the person who chooses to payoff the mortgage a market timer? They choose to place investment funds into a house today rather than keep it in their long term portfolio?

I would argue that this is different. Whether you own the house free and clear or own the house with a mortgage on it, you own the house. Paying off the mortgage is not "placing investment funds into a house".

If you run the FIRECALC simulations you will discover that increasing your equity/bond ratio does increase volatility, SWR and terminal value. But keeping the mortgage does not increase volatility and it will increase SWR more than a simple readjustment in allocation.

WADR to firecalc, that flies in the face of common sense. A mortgage is a bond, so owing on a mortgage is in essence a big negative bond position. It changes one's portfolio allocation. Firecalc is underestimating overall portfolio volatility for the person with a mortgage.

Take me as an example. I own a house free and clear. I own an investment portfolio free and clear. The investment portfolio is 60/40 equity/bonds. Suppose I take a mortgage on the house, plunk the proceeds into bonds (hell, if you want exact, say I plunk the proceeds into GNMAs) and my investment portfolio asset mix goes to 50/50.

I think most people would look at that and say nothing has changed very much. But Firecalc would make all sorts of adjustments, showing decreased volatility, SWR and terminal value. Why? Because Firecalc only estimates the volatility of the asset side of the balance sheet (and, to be absolutely correct, only some assets at that - where are the volatility estimates for assets like houses or SS payments or private pensions from rickety employers) and presumes that the liabilities, including the mortgage, have no volatility.

nfs, I don't want to talk you out of your strategy. It really does make no difference to me what you or anyone else on this board decides to do for themselves. I think, above all, you should be comfortable with your decision. But I am interested in making it clear to people who are facing this decision that it is more complex than a simple rule-of-thumb directive might make it. And I do want to provide some indication of how one might take a look at the numerical part of the decision.

Fair enough. But you can't point people to Firecalc as an indication of the wisdom of an investing strategy when, as we all know, Firecalc - and any other calculator - makes all sorts of assumptions, some explicit and some quite hidden, and can provide only approximate answers in the best of cases. This is not to say that nonsense like that of he who cannot be named is worth endless rehashing but people need to be wary of GIGO too.

 

[sgeeeee]

Re: C'mon, guys.

. . .
Fair enough.  But you can't point people to Firecalc as an indication of the wisdom of an investing strategy when, as we all know, Firecalc - and any other calculator - makes all sorts of assumptions, some explicit and some quite hidden, and can provide only approximate answers in the best of cases.  . .

nfs,

Of course none of us can predict the future and that is the primary failure of any financial calculator -- FIRECALC included. But we do no how FIRECALC works and what the underlying assumptions are. The calculation techniques and methods have been around for a long time and have been discussed by many of us for several years. I'm not sure what assumptions you think FIRECALC is making. It is a historical simulator and it simply tells you what the performance of specified portfolios would have done over specified intervals throughout the period from 1872 to today. You can use it to test how things would have behaved over past periods of time.

So when you run 30 year FIRECALC simulations to look at the performance of a 5% mortgage vs a payoff of the same, you simply determine how they would have performed for every 30 year period from 1872 to today. There are of course other assumptions related to expense ratio, etc. that the simulator asks for. It is true that even if a particular mortgage may have provided superior performance in every 30 year period throughout history, it may not provide superior performane in the next 30 year period. No simulator can provide you with that kind of information.

In the example you make (taking a mortgage, reducing stock allocation, investing in GNMA) . . . FIRECALC is not capable of performing that analysis since it cannot look at the GNMA investment using it's historical data base. But I do believe that the analysis it is capable of doing is more useful than you seem inclined to believe.

You seem to believe that an investor increases volatility significantly by keeping a mortgage. In an absolute sense, this is true -- since the investor with $2M invested in a 50/50 allocation portfolio will see greater absolute variations than the investor with only $1.5M invested in the same way. But, of course, on a percentage basis the volatility is identical.

Further, the percentage volatility of a fixed mortgage on investment performance is zero (ie. no fluctuation). In fact, when viewed in terms of real return, a mortgage improves investor volatility significantly in the presence of any inflation since it reduces the effect of all other inflating prices. That is precisely the reason that people who chose to keep low interest mortgage have historically performed better than those who chose to pay them off.

 

[nfs]

Re: C'mon, guys.

Of course none of us can predict the future and that is the primary failure of any financial calculator -- FIRECALC included. But we do no how FIRECALC works and what the underlying assumptions are. The calculation techniques and methods have been around for a long time and have been discussed by many of us for several years. I'm not sure what assumptions you think FIRECALC is making. It is a historical simulator and it simply tells you what the performance of specified portfolios would have done over specified intervals throughout the period from 1872 to today. You can use it to test how things would have behaved over past periods of time.

Okay, tell me how one uses Firecalc to model the twelve years starting from just before the crash in 1929 until just prior to Pearl Harbor in 1941. It was a horrendous time for stocks, a horrendous time for corporate bonds, and a horrendous time for residential real estate. Firecalc takes the first one into account, ignores the second one - making a presumption that spreads for corporates over Treasuries are some fixed amount - and presumes that the user can guess what buying or selling a house in godnose how many years hence might bring or cost.

Assume that you were running Firecalc in July 1929. Assume that historical stock market returns and volatility were similar to what Firecalc uses today. You can even assume that you would be smart enough to avoid corporate bonds and buy only Treasuries if you like.

If you have a house in 1929 with no mortgage, Firecalc's answer would be, "You can take $X a year and you have a Y% probability of the portfolio surviving Z years." I can live with that estimate.

Now put a mortgage on the house and plunk the money into your portfolio in 1929. Firecalc knows that the portfolio returns go to hell in short order and adjusts the SWR. Firecalc does know that you have committed yourself to a fixed expenditure during which time the CPI falls by a 1/3, but it is not clear from the description that it knows that the portfolio's income (not total return, income) could fall below the expenditure level, which makes liquidations of securities at low prices necessary. Worst of all, Firecalc does not know that there's an anxious mortgage lender who can see that you're having trouble making mortgage payments and that the asset he thought was good collateral is worth 1/4 of what it was a few short years before.

I'm not indicting Firecalc. But even if you presume that markets will never be unkinder than what is already in the historical record, and presume that every number you input is biased to the conservative side, there ain't no toggle for "antsy mortgagee" or "I'll be blowed - my million dollar house is worth $60k on the open market." You may laugh but both of those happened in the 30s and Firecalc has never been told to imagine that they could.

(Just to give another example of a hidden presumption, note that SS payments in constant dollars are presumed a given. If your time horizon is ten years, that might be justified. If it's 25 years or more, it ain't gonna happen. The unfunded liability is going to have to be covered somehow and there aren't enough workers. Where's the toggle for "Congress screws me over in 2017"? )

Further, the percentage volatility of a fixed mortgage on investment performance is zero (ie. no fluctuation).

I'm sorry, but I believe that to be wrong. Do you also believe that there is no volatility to a bond with a fixed coupon? Or, to use the simplest possible example, a CD?

In fact, when viewed in terms of real return, a mortgage improves investor volatility significantly in the presence of any inflation since it reduces the effect of all other inflating prices.

Of course. But what does the mortgage do in the presence of deflation?

 

[sgeeeee]

. . . Fearing an ensuing discussion of folding kyaks and the removal of my dryer sheet status, I will choose to move on. Good luck.

 

[ESRBob]

SG and NFS --Re: 6 Mortgage Myths

SG and NFS --

oops, deleting my original post -- everything I was saying was covered by TH a week ago; serves me right for ignoring the post until the 5th page and then thinking I could add something useful!

ESRBob

 

[retire@40]

Finally, there was one initial assumption, I believe, that got this started:  that your true cost of the mortgage (Cost of Capital) was reduced from the mortgage rate by a tax savings.  What most ERs find is that their federal and state taxes drop dramatically once they get themselves organized, earning little or no salary, less taxable income, etc.  So while the math might work for someone in salary/accumulation mode still in a high tax bracket, it doesn't really work for the ER.

True. And even though one of my prior calculations proves that investing in a 4% tax-free bond is better then paying off a 5% mortgage for somebody in the 28% bracket, I would not even listen to my own conclusions and still pay off the mortgage before investing in such a scenario because I just don't want debt of any kind.

I kinda had a similar situation when I purchased my car. The dealer wanted to offer me something like 2.9% financing at a time when I could have got something like 4% at a bank. The dealer was trying to convince me that I would be earning a net difference of 1.1% by going with the financing. I told him he was forgeting that I had to pay taxes on my earned interest but the interest expense was non-deductible. It would have practically been a break-even. So I told him I would only take zero financing or pay cash for the car.

 

[cute fuzzy bunny]

Oh my, I take a few days off and the place just fills up with unread stuff. You guys need jobs...

In case anyones missed me, the wife's well into the 3rd trimester and has denounced performance of any further tasks around the home, and she's needing a lot of bedrest. On top of that, i'm getting her old house ready for sale...yes...the painting has begun! As a result of all that, plus feeding six animals and becoming a full fledged house-husband, I hardly have time to turn on the PC anymore, let alone spend the hour or so a day of collective time posting here that I've enjoyed in the past. I'll try to stop by from time to time, but wouldnt expect to hear much from me for the near future. I've certainly learned a lot and hope I imparted some of my learnings.

As far as this topic goes and to close it off for good, as far as I'm concerned...

Mikey dearest...your last post to me implied that my position on this topic was "blanket assertions" rather than "demonstrable facts". Rather angry and inaccurate, since I've not only provided explanations and data based examples of most, if not all, of my perspectives on this. In fact, I've used realistic examples of the time people spend in homes, risk factors and so forth. I havent simply ignored all the apples and orange differences in order to force a point. You later make another hostile comment about people being able to make up their own minds 'without being told what to do by TH'...well, I dont think I told anyone anything anywhere in here 'what to do', nor is that my interest or intention. My response to you that your points were well made but wasnt directly applicable to this discussion, I think, was reasonable. I didnt insult you. I didnt question your motives or intentions. Your response however, was in fact hostile and insulting. Its entirely possible you cant see that, and you wouldnt be the first person to be unable to recognize their own hostility. As far as the pampers go, I just bought a truckload of them, so they were on my mind, and the correlation between those and what I felt was an immature and unreasonable post ("you're a poopy head and you aint the boss of me") was easily made. In your analysis, no analogy would ever be acceptable because one could always draw up differences. You did note some differences, they had no material effect on the analogy used, you got angry and snippy, and for that you received an appropriate response.

Moving on...

Nords...you're 100% correct. "Salaryguru" is a troll. He claims this topic was for the benefit of the group. In truth, there really isnt anything in this article he references that should be new or even very interesting, other than another opportunity to bring up the mortgage debate. He knows I'll take the bait when someone claiming a "factual" approach to a subject uses erroneous math, factors that arent met with reality, and mismatched calculations. Unfortunately, I meet his expectations every time. You'll see that he posted and got the ball rolling, then sat back while we all picked at each other. Then when I was busy for a few days, in that absence he waxed on about his own agenda, then ran away when someone else challenged his funny math and approach. Trolls introduce topic materials they know will be inflamatory, delight and participate in the mayhem that ensues, and hope to create an undesirable effect for one or more discussion participants. Salaryguru feels I dislike him and that my presence and participation in discussion groups is a negative influence, and laments that many other posters enjoy my participation. His reasons to troll are therefore not hard to understand. Because I've disagreed with him, he's perceived me as a threat to his person and his ideas, and he is unable to separate disagreement with an idea from personal hate. I've offered him an olive branch on several occasions, and he's neglected to take it. I've been left just to feel sorry for him.

As a final recap...I'll point out up front that we've talked about this so often that many of the better parts have been left behind as we've all been cultured to 'cut to the chase'. I think if you read my very first posts on this topic, about a year back, I said that I think most people already have their minds made up about it and are simply looking for validation of that decision. Like many other topics, I dont think a lot of our mindsets are changed by reading something on an internet bulletin board.

As long as every reader understands that they've got a risk free, guaranteed return, along with an opportunity to reduce their market exposure and withdrawal rates on one hand, and a risky, potentially higher return with more market exposure and a higher withdrawal on the other, then you know the score. Suspect anyone that says either approach is a 'no brainer' and/or offers funny math with incorrect numbers, unreasonable investment periods, or that claims history is a sure judge of the near term future. This issue of where you put a few hundred thousand dollars is pretty important to any retirees short to intermediate term financial health. Make that decision well informed with all the facts in hand. Not on the platitudes of some asshat.

Since I wont be here much, if anyone wants to yap, I can be reached at t_h at comcast dot net.

Prosp long and liver...

 

[Cut-Throat]

Since I wont be here much, if anyone wants to yap, I can be reached at t_h at comcast dot net.

Prosp long and liver...

Say it ain't so TH ! - You're are my lifeline to the high-tech world! - I'm about to go DSL, Wireless etc.

Man - come to your senses!

 

[John Galt]

Boys, boys! Let's try to keep a certain level of civility and decorum. You would never catch me deliberately
gigging one of my fellow posters

John Galt